Keep$-$or$-$Drop Decision

Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement follows:

Line Item Description Torch Elk Walloon Total

Line Item Description $($Shown in $000\text{'}$s$)$

Sales revenue $$1,280$ $$185$ $$435$ $$1,900$

Less: Variable expenses $1,115453261,486$

Contribution margin $$165$ $$140$ $$109$ $$414$

Less direct fixed expenses:

Depreciation $50151075$

Advertising $9585112292$

Segment margin $$20$ $$40$ $$(13)$ $$47$

Direct fixed expenses consist of depreciation and advertising. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold.

Assume that each of the three products has a different marketing campaign whose advertising would remain if the associated product were dropped.

Required:

$1.$ Conceptual Connection: Estimate the impact on profit that would result from dropping Wallon. Enter amount in full, rather than in thousands. For example, $"15000"$ rather than $"15".$

fill in the blank $1$ of $1$$

$2.$ Should Petoskey keep or drop Walloon?